Published:
06-Mar-08
France's two largest commercial broadcasters saw double-digit growth in advertising revenue for their digital channels in 2007 bolstering their overall income for the year. M6 fared better than its larger rival TF1 and is beginning to catch the market leading channel in terms of advertising revenue. By contrast TF1 had flat revenue growth in 2007. Both groups remain largely profitable despite audience fragmentation and sluggish market conditions.
M6 group total revenues have grown by 5.7 per cent in 2007 to Euro1,356m. Advertising revenues (mostly M6 channel and the group's ten digital channels) have grown by 6.9 per cent. M6's flagship channel posted Euro681.6m of revenues (up four per cent), digital channel revenues were up 51 per cent at Euro100m. The main M6 channel's advertising revenues grew 4.0 per cent at Euro675.9m, while TF1's fell 0.5 per cent. Average prime-time rating for M6 was 3.5m viewers.
M6's portfolio of digital channels (W9, Paris Premiere, Teva, Série Club, Fun TV ) increased combined advertising revenues by a massive 51.1 per cent to Euro60.5m from Euro40.1m in 2006. For the first time, digital channels are reaching total revenues of Euro100m overall posting a positive operating result (EBITA) of Euro0.3m as opposed to a Euro2,6m loss in 2006, with +3m Euros expected in 2008, while M6 channel posted Euro196.5m of positive EBITA.
M6 Group's EBITA was positive by Euro236m up Euro13.1m from 2007 despite a negative EBITA from publishing activities due to bad sales of music and DVDs. M6 Group's net profit was Euro168.7m. TF1 posted a stable EBITA of Euro305m and a net profit of Euro228m. Profit rates are artificially down for both companies in 2007 due the exceptional financial profits made in 2006 following the sale of their shares in pay TV platform TPS.
In terms of audience shares, both TF1 and M6 flagship channels lost about one point to digital channels with TF1 at 30.7 per cent and M6 at 11.5 per cent for 4-years-old+ individuals. However, since the beginning of 2008 TF1's audience share has fallen consistently below 30 per cent. However this remains an extremely high market share by European commercial standards and TF1 and M6 frequently note that for the demographics that is mostly traded (women under 50) their viewing share remain respectively 34.8 and 18.0. All digital channels have retained a 17.5 per cent market share in 2007, up four points in just a year, thanks to fast-growing DTT penetration.
M6 and TF1 also confirmed that they will launch their HDTV simulcast on DTT in the course of 2008.
Our take...
Even though M6 was more successful than TF1 in 2007, both broadcasters share very similar strengths and strategies. Both are investing wisely but consistently in their portfolios of digital channels. TF1's TMC and M6's W9 are the two most successful digital free-to-air channels in France. Thanks to fast-growing penetration of DTT, they now account for 1.7 per cent and 1.4 per cent of the audience in January 2008 (each having about 3.5 per cent viewing share in DTT homes alone). Both channels are still losing money because they are heavily investing in programmes to secure their place among the top 10 channels.
Both groups are enjoying solid growth from their digital channels. Advertising revenues from TF1's French thematic channels were Euro92m in 2007, already five per cent of group total advertising revenue and growing 24 per cent on 2006. M6's digital channel revenues (Euro60m) are already eight per cent of total advertising revenue and growing even faster (51 per cent). With multichannel penetration still growing and the end of advertising sales on public service channels planned in 2009, we believe digital TV advertising will grow by 30 per cent in 2008 and 50 per cent in 2009.
As for prospects, not much growth can be expected this year, despite the UEFA tournament broadcast by both TF1 and M6. The first quarter trading has been very bad and Screen Digest expects the French TV advertising market to be flat (plus 30 per cent for digital channels, but down two per cent for national analogue channels). M6 says it will use the championship as a loss leader to raise the channel's profile. It has acquired for the first time games involving the French national team, but admits that the cost of the games will not be recouped by advertising sales.
Perspectives are much rosier in the mid term, M6 and TF1 are planning to use more flexible insertion rules following the transposition on European Directive. When France Televisions stops advertising, possibly as early as 2009, M6 expects 60 per cent of France Televisions þ700m net revenues (around þ400m) to be transferred to M6 and TF1 groups. With a combined market share of 80 per cent they should massively benefit from the measure.
In the long term, heading towards analogue switch-over, both groups will also benefit from a free 'bonus' frequency on DTT after analogue switch-off, allowing them to launch an additional channel. TF1 said it's also considering buying one of the existing independent DTT channels once allowed by anti-trust rules relaxation.
France,
